Code of Ethics & Professional Responsibility
Table of Contents NRMLA Code of Ethics & Professional Responsibility………………………………………….1 ETHICS ADVISORY OPINION 2008-01: Ethical Advertising………………………………...12 Published February 28, 2008 ETHICS ADVISORY OPINION 2009-1: Ethical Offers of Other Financial and Insurance Products and Services……………………………………………………………………………16 Published June 16, 2009 ETHICS ADVISORY OPINION 2009-2: Lead Generation State Licensing Requirements and Ethical Advertising………………………………………………………………………………21 Published June 16, 2009 ETHICS ADVISORY OPINION 2010‐01: ETHICAL HECM‐TO‐HECM Refinancing and Anti- Churning Practices……………………………………………………………………………….25 Published September 30, 2010 ETHICS ADVISORY OPINION 2010‐02: Additional Ethical Advertising Practice Requirements…………………………………………………………………………………….29 Published October 15, 2010 ETHICS ADVISORY OPINION 2011-01: Wholesale Lenders, TPOs and Ethical Advertising………………………………………………………………………………41 Published January 18, 2011 ETHICS ADVISORY OPINION 2011-02: Ethical Refinancing of Reverse Mortgage Loans …………………………………………………………………………………45 Published February 24, 2011 ETHICS ADVISORY OPINION 2012-1: 2012 Update: Ethical Advertising Practice Requirements…………………………………………………………………………………….47 Published September 20, 2012 ETHICS ADVISORY OPINION 2013-1: Ethical Product Offerings………………...................54 Published April 18, 2013 ETHICS ADVISORY OPINON 2013-02: Full Draw HECM Loan Repayment Considerations…………………………………………………………………………………...56
Published July 10, 2013 ETHICS ADVISORY OPINION 2013-03: Ethical Refinancing of HECM Single Disbursement Lump Sum Payment Option Loans and Anti-Churning Practices……………………………….58 Published October 17, 2013 ETHICS ADVISORY OPINION 2013- 04: Ethical Considerations Affecting HECM Loan MIP Premium Decision………………………………………………………………………………………….62 Published October 17, 2013 ETHICS ADVISORY OPINION 2014-1: Ethical Refinancing of HECM Reverse Mortgage Loans and Anti-Churning Considerations-Updated……………………………………………...64 Published September 26, 2014 ETHICS ADVISORY OPINION 2015-1: Freedom of Choice Remaining Draw Options After 12 Months/Ethical Obligations and Restrictions…………………………………………..68 Published February 4, 2015 ETHICS ADVISORY OPINION 2015-2: Ethical Refinancing of HECM Reverse Mortgage Loans and Anti-Churning Requirements-New Requirements…………………………………..,70 Published October 30, 2015 ETHICS ADVISORY OPINION 2016-1: Unethical Planned Prepayment HECM Loans……...74 Published May 6, 2016 ETHICS ADVISORY OPINION 2018-1: Re-Affirming the Code of Ethics’ Consumer Bona Fide Advantage Requirement……………………………………………………………………77 Published June 29, 2018 ETHICS ADVISORY OPINION 2022-1: Responsible Information Sharing of Mortgage Professional Adverse Activity............................................................................................................................79 Published May 23, 2022 ETHICS ADVISORY OPINION 2023-1: Ethical Considerations: Applicant Age and Loan (Credit) Pricing Adverse Activity............................................................................................................................82 Published September 25, 2023
1 NRMLA Code of Ethics & Professional Responsibility Ethics and Standards Complaint Procedures (As Revised June 16, 2009) Preamble and Applicability The NRMLA Code of Ethics and Professional Responsibility (Code of Ethics) describes Values shared and Rules applicable to all NRMLA Members. Under the Code of Ethics, NRMLA Members generally are responsible and will be held responsible for the actions or failures to act of their officers, directors, employees, agents and representatives. NRMLA Members unable or unwilling to commit and to adhere to the Values and comply with the Rules, or that are determined by the NRMLA Ethics and Standards Committee not to have so complied, may not be NRMLA Members. This Codes of Ethics does not describe, nor does it attempt to describe, the full range of conduct and behavior to which NRMLA Members may subscribe or adhere as they participate in the reverse mortgage marketplace and interact with consumers in an ethical, professionally responsible, and lawful manner. What the Code of Ethics does describe are the Values and Rules applicable to NRMLA Members if they are to be and remain NRMLA Members. Accordingly, the Code of Ethics does not define the standards and behavior of a NRMLA Member for the purpose of determining its civil or criminal liability. This Code of Ethics also does not impose on NRMLA Members the duty of learning or disclosing technical facts pertaining to taxation, real estate law, retirement planning or financial advice involving the real estate or financial markets. This Codes of Ethics also does not confer any rights upon any NRMLA Member or any complainant or third party. Composition and Scope The Code of Ethics is divided into two parts: Part 1 – Values and Part II – Rules. The Values convey the ethical and professional principles that NRMLA Members are expected to portray in all business and professional interactions. The Rules address the guidelines and standards of ethical and professional behavior applicable to NRMLA Members.
2 Compliance Member organizations are required to adhere to the Values and comply with the Rules of the Code of Ethics if they are to be and remain NMRLA Members. The Ethics and Standards Committee will investigate, review and take appropriate action with respect to alleged violations of the Code of Ethics by NRMLA Members, under the policies and procedures set forth in Appendix A. Part 1 – Values NRMLA Members are mindful that the soundness, usefulness, prosperity and future of our industry depend upon their honor and integrity, and on the manner in which they interact with each other and with the seniors whose interests they serve. Accordingly, each NRMLA Member agrees to observe and maintain and adhere to the following Values. Value 1: Fairness NRMLA Members shall treat consumers with respect and dignity, and in a manner that is fair, reasonable and as they would want to be treated. Value 2: Confidentiality NRMLA Members shall appropriately respect, protect, preserve and safeguard the privacy of and confidentiality of information obtained from and about consumers. Value 3: Integrity NRMLA Members shall act with integrity, adhering both to the letter and the spirit of this Code of Ethics, and appropriately and timely disclosing to consumers potential conflicts of interest. Value 4: Competence NMRLA Members shall provide services to consumers in a competent manner, acquiring and maintaining necessary and appropriate knowledge, skills and experience to do so, and referring consumers to others with such knowledge, skills and experience when they are unable to do so. Value 5: Diligence NRMLA Members shall provide services to consumers with diligence and due care, promptly, thoughtfully, in a manner considerate of the interests of consumers and fully in compliance with all applicable legal and regulatory requirements. Value 6: Professionalism NRMLA Members’ conduct shall reflect positively on NRMLA, the profession and the industry.
3 Part II – Rules Consistent with the Values described in Part I, NRMLA Members agree to comply with the following Rules (as applicable). Rules Related to the Value of Fairness Rule 101 NRMLA Members shall timely and accurately describe to consumers: Material information relevant to the relationship, including, the Member’s business affiliation, contact information, and the scope of and limitations on the Member’s authority to act; and The information required by all laws applicable to the relationship in a manner complying with such laws, including counseling agency contact information, estimates of fees and charges, and relationships with others who may be assisting or providing related services. Rule 102 NRMLA Members compensation shall be reasonable in amount and clearly and timely described to consumers. Estimates shall be clearly identified as such and be based on reasonable assumptions. Rule 103 NRMLA Members directly or indirectly offering or providing goods or services to consumers (including, for example, insurance or investment products) in conjunction with or that are related to their reverse mortgage lending activities for such consumers, shall do so only in a manner consistent with applicable law and under terms and conditions that are clearly and timely described to such consumers. Rule 104 NRMLA Members shall not, directly or indirectly, solicit or communicate with consumers through false or misleading or deceptive or unfair communications or advertisements or in any manner inconsistent with applicable law. In such communications and advertisements, NRMLA Members shall not refer to third parties (including, for example, HUD or the FHA or the federal government or the AARP) unless such third parties have agreed to be so referred to therein. A communication or advertisement on behalf of NRMLA Member clearly shall identify that NRMLA Member. Rule 105 NRMLA Members shall not engage in conduct involving dishonesty, fraud, deceit or misrepresentation, or knowingly make a material false or misleading statement to consumers or others.
4 Rule 106 NRMLA Members shall offer and provide their products and services to all consumers who may be eligible or qualified for them, and in compliance with all applicable fair housing and fair lending laws. Rule 107 NRMLA Members shall describe to consumers the range of programs and products generally available in the marketplace that may provide a bona fide advantage to such consumers. Rule 108 In appropriate cases, NRMLA Members shall encourage consumers to review contemplated transactions with their family members or trusted advisors, and shall reasonably cooperate in such reviews. Rule 109 NRMLA Members shall make a good-faith effort to resolve concerns received from consumers about the products and services they offer or provide to them. Rules Related to the Value of Confidentiality Rule 201 NRMLA Members shall take reasonable steps (including implementing appropriate training and compliance procedures) to help assure that the privacy of and confidentiality of information obtained from and about consumers is respected, protected, honored and safeguarded, and shall do so in a manner consistent with applicable law. Rules Related to the Value of Integrity Rule 301 NRMLA Members shall accurately describe both the costs and benefits of the products and services presented to consumers. Rule 302 NMRLA Members shall not require directly or indirectly that products or services other than the reverse mortgage loans they offer or provide, also must be purchased by consumers in order to obtain reverse mortgage loans from or through them. Rule 303 Other than as appropriate under the circumstances (including for example to pay third party costs, make prior loan payoffs or fund set-asides directly related to reverse mortgage transactions), and unless otherwise directed by consumers, NRMLA Members shall arrange for the disbursements of reverse mortgage loan proceeds directly to such consumers.
5 Rule 304 Material potential conflicts of interests involving NRMLA Members and consumers shall timely and accurately be described to consumers prior to the rendering of material services by such Member so that they, assisted as appropriate by family members, trusted advisors and counselors, reasonably may assess whether and the circumstances under which they may choose to do business with such NRMLA Members. Rules Related to the Value of Competence Rule 401 NRMLA Members shall acquire and maintain the necessary and appropriate knowledge, skills and experience required to competently offer and provide their products and services in a manner consistent with this Code of Ethics and applicable law, including, as applicable, in the origination, processing, underwriting, closing and servicing of reverse mortgage loans. Rule 402 NRMLA Members shall advise consumers to seek legal, tax, and investment counsel and advice, if it may reasonable appears to be in the interests of such consumers that they do so, prior to making decisions involving reverse mortgages. NRMLA Members not qualified and appropriately licensed to provide such counsel and advice to consumers shall not do so, and shall, instead, refer such consumers to those who are. Rules Related to the Value of Diligence Rule 501 NRMLA Members shall exercise reasonable efforts to secure sufficient information to determine the consumer’s needs and objectives. Rule 502 NRMLA Members shall provide their products and services to consumers with diligence and due care and in a manner considerate of the interests of such consumers. Rules Related to the Value of Professionalism Rule 601 NRMLA Members shall take reasonable steps to help assure that their employees understand and act in a manner consistent with the requirements of this Code of Ethics. Rule 602 NRMLA Members shall neither accept no condone actions or failures to act of other NRMLA Members that are inconsistent with this Code of Conduct. NRMLA Members knowledgeable about potential material violations of this Code of Ethics by others subject to its provisions strongly are encouraged to bring such potential violations to the attention of NRMLA in the manner described in this Code of Ethics.
6 Rule 603 NRMLA Members shall not bring or threaten to bring complaints under this Code of Ethics, or make or threaten to make use of this Code of Ethics, for no substantial purpose other than to harass, maliciously injure, embarrass and/or unfairly burden another NRMLA Member. Rule 604 NRMLA Members timely shall pay to NRMLA amounts due and owing to it related to their membership in NRMLA. Rule 605 NRMLA Members shall comply (with the advice of qualified counsel as appropriate) with all applicable regulatory requirements include provisions of the federal Real Estate Settlement Procedures Act barring among things referral fees and kickbacks, state mortgage regulatory provisions requiring licensing, and, with respect to FHA-insured HECM reverse mortgage loans, FHA requirements regarding licensing and employees and restricting arrangements with third parties. Rule 606 NRMLA Members reasonably shall cooperate with NRMLA and its Standards and Ethics Committee in their consideration of complaints under this Code of Ethics made against or involving them. NRMLA Members shall honor the confidentiality requirements described in Appendix A of the Code of Ethics that are applicable to them. Rule 607 NRMLA Members shall employ individuals who have passed a background check and are determined by them to be of good moral character.
7 Appendix “A” NRMLA’s Policies and Procedures: Code of Ethics Complaints Against Members (As Revised June 16, 2009) The President of NRMLA will receive and review complaints that NRMLA Members have violated the NRMLA Code of Ethics and take action, including referring complaints to the Co-Chairs of the NRMLA Ethics and Standards Committee for consideration by the Committee, pursuant to the following policies and procedures. The President of NRMLA, in consultation with the General Counsel of NRMLA as appropriate, shall have the discretion to vary these procedures when it is determined that to do so would be in the best interests of NRMLA and its Members. These policies and procedures do not confer any rights upon any NRMLA Member or any complainant or third party. I. Source of Complaints A. Complaints May Originate From: 1. Members (including but not limited to the President of NRMLA and the Co-Chairs and Members of the Ethics and Standards Committee), or 2. Non-Members (including consumers) B. Complaints May Be Against: 1. Members, or 2. Non-Members II. Receipt and Review of Complaints A. Complaints initially will be referred to and reviewed by the President of NRMLA. B. NRMLA shall not review or act upon anonymous complaints. (However, in limited circumstances, as described below, NRMLA may respond to complaints without further identifying the complainant.) C. Complaints against Non-Members NRMLA will respond to complaints against Non-Members by informing the complainant that NRMLA is unable to take action in response to such complaints, and, where appropriate, refer the complaining party to an
8 appropriate agency or authority if it appears that they may be able to be of assistance. In addition, or as an alternative, NRMLA itself may bring such complaints to the attention of such agencies or authorities with a request that they make such further inquiries and take such further steps, in response to such complaints, as they deem appropriate. D. Complaints against Members 1. Complaints against Members should contain sufficient facts to permit an “initial determination” to be made by the President of NRMLA. (a) If, in the judgment of the President, the complaint contains sufficient facts upon which the President may make an “initial determination,” the President shall take one of two actions: (i) If the complainant does not state a complaint against a Member of the type or scope that warrants further action, the President shall inform the complainant of that determination by the President and the decision of the President shall be final. The President concurrently shall report all such determinations to the Co-Chairs of the Ethics and Standards Committee, including a brief statement of the reasons for the determination. (ii) If the complainant states a complaint against a Member of the type and scope that warrants further action, the President shall seek and secure from the complainant the complainant’s agreement that the written complaint or any statements contained or information included therein (including but not limited to the identity of the complainant) may be shared with the Member that is the subject of the complaint or any other party deemed necessary and appropriate to assist in better understanding or resolving the complaint, including members of the Ethics and Standards Committee, the Board of Directors, and General Counsel. (b) If, in the judgment of the President, the complainant does not recite and include sufficient facts or allegations upon which the President may make an ”initial determination,” NRMLA will notify the complaining party that additional facts are required and provide an additional ten (10) business days from the date of such letter for the complainant to supplement the complaint. In any event, before forwarding a complaint to the Ethics and Standards Committee or any other person or entity, the President shall secure the agreement of the complainant that the written complaint and any statements contained or information included therein (including but
9 not limited to the identity of the complainant) may be shared with the Member that is the subject of the complaint or any other party deemed necessary and appropriate to assist in better understanding or resolving the complaint, including members of the Ethics and Standards Committee, the Board of Directors, and General Counsel. Absent special circumstances, a refusal by a complainant to agree to such sharing of the complaint (with the identify of the complainant redacted as requested and appropriate) will result in an initial determination by the President that NRMLA will take no further action in response to the complaint, and the notification to the complainant (and the Ethics and Standards Committee Co-Chairs) of that final determination by the President 2. Upon receipt of the complainant’s affirmative response to a NRMLA acknowledgement and letter of agreement, the President generally shall provide the Member about which the complaint has been made with an opportunity to respond to the complaint. 3. Ordinarily, the President will provide the respondent Member ten (10) business days to respond in writing. Absent special circumstances, the failure of a respondent to deny or explain any material fact alleged in the complaint within the established response period will be deemed an admission of such fact. 4. The President, based on the complaint and/or the response thereto, and other investigation and consideration of the matter as the President deems necessary and appropriate, shall decide either: (a) to take no further action in regards to the complaint, having concluded that it is not of the type or scope to warrant further NMRLA action (in which event the President shall so notify the complainant and the respondent Member, and the Ethics and Standards Committee CoChairs (accompanied by a brief explanation of the basis for the President’s determination); or (b) to refer the complaint and response and related materials to the CoChairs of the Ethics and Standards Committee, accompanied by a brief explanation of the President’s reasons for so referring the complaint. III. Review and Action by the Ethics and Standards Committee A. Unless either Ethics and Standards Committee Co-Chair disagrees with President (in which case the Ethics and Standards Committee Co-Chair shall so notify the President and Chair of the Board of Directors), the Ethics and Standards Committee shall review the complaint, response and related information referred for action by the President.
10 B. On the basis thereof, and other investigation and consideration of the matter as the Ethics and Standards Committee deems necessary and appropriate, the NRMLA Ethics and Standards Committee shall determine whether the NRMLA Code of Ethics has been violated by the Member that is the subject of the complaint, and, if so, the Ethics and Standards Committee shall determine the action of NRMLA in response thereto. In general, and subject to the provisions of Section C immediately below, actions by the Ethics and Standards Committee against a Member shall be limited to probation (for a specified period, during which another Code of Ethics violation will lead to suspension or withdrawal of NRMLA Member membership), suspension of NRMLA Member membership (for a specified period of time), or withdrawal of NRMLA Member membership for at least three years. A copy of the opinion shall be provided to the complainant, the Member respondent (with redaction of the complainant’s name, as appropriate), the President, and the Co-Chairs of the NRMLA Board of Directors. Opinions of the NRMLA Ethics and Standards Committee are final decisions of NRMLA, subject to the provisions of Section C immediately below. C. In addition, in circumstances in which the Ethics and Standards Committee determines it to be appropriate, the Committee may decide publicly to: (i) describe the actions taken by the Committee; (ii) describe the Committee’s reasoning; (iii) describe the facts and circumstances that prompted the Committee to act; and/or (iv), subject to additional safeguards described immediately below (the “Additional Safeguards”), identify the NRMLA Member subject its action, by name (with (iv) referred to in these Policies and Procedures as “Naming the Respondent”). Among the circumstances in which the Ethics and Standards Committee may determine it appropriate to Name the Respondent are when it concludes that doing so may serve the Values for which the NRMLA Code of Ethics has been published. Those Values include an express recognition by NRMLA’s Members that “the soundness, usefulness, prosperity and future of our industry depend on the manner in which they interact with each other and with the seniors whose interests they serve.” As Additional Safeguards, when the Committee determines it to be appropriate to Name the Respondent, it shall notify the NRMLA Member of that determination, and of the intention of NRMLA to do so unless the affected NRMLA Member timely appeals that determination (and describes the basis for its appeal), to NRMLA , in writing, within ten (10) days of that notification. A timely appeal shall be decided by a special three-person Appeals Committee comprised of three (3) Directors appointed by the CoChairs of NRMLA, none of whom shall have been members of the Standards and Ethics Committee that made the determination to Name the Respondent. There is no requirement that the Appeals Committee be a “standing” committee of NRMLA. Neither the NRMLA Member nor its lawyer or representative may appear before, argue before, or contact the Appeals
11 Committee; the appeal shall be in writing, only. The Appeals Committee, in its discretion, may uphold or reverse the decision of the Standards and Ethics Committee to Name the Respondent. Decisions of the Appeals Committee are final decisions of NRMLA. D. The Ethics Committee shall confer with the President and the General Counsel, as appropriate, and no adverse action shall be taken against a Member without the prior concurrence of the General Counsel that it is action that NRMLA may take against such Member under applicable law and NRMLA’s policies and procedures and this Code of Ethics. E. The President of NRMLA and the Co-Chairs of the Ethics and Standards Committee shall submit written quarterly reports to the Board of Directors as to the actions taken or not taken with respect to complaints received by the President, and as to recommendations with respect to appropriate amendments to these Policies and Procedures, and the Code of Ethics, as appropriate. IV. Confidentiality All Members and NRMLA staff, including but not limited to the President; the Co-Chairs and members of the Ethics and Standards Committee; and members of the Board of Directors, shall maintain the strict confidentiality of all complaints, responses, recommendations and opinions related to any complaints subject to these Policies and Procedures and the Code of Ethics, except as otherwise expressly provide in this NRMLA Code of Ethics. A violation by any Member of this requirement for maintaining strict confidentiality shall be considered by NRMLA to be a violation by such Member of the Code of Ethics.
1400 16th Street, NW Suite 420 Washington, DC 20036 Tel. 202.939.1760 Fax. 202.265.4435 www.nrmlaonline.org ETHICS ADVISORY OPINION 2008-01: Ethical Advertising February 28, 2008 The Ethics and Standards Committee (the “Committee”) of the National Reverse Mortgage Lenders Association (“NRMLA”), the trade association of the reverse mortgage lending industry, enforces the NRMLA Code of Ethics and Professional Responsibility (the “Code of Ethics”). All NRMLA Members are required to comply with the Code of Ethics as a condition of their continued membership in NRMLA. If the Committee determines that a NRMLA Member has not complied with the Code of Ethics, sanctions may be imposed, up to and including the termination of NRMLA Membership. Committee decisions enforcing the Code of Ethics may be made public. The Committee also interprets the Code of Ethics, and, from time to time, proposes changes to it for consideration and approval by the NRMLA Board of Directors. This is the Committee’s first formal interpretation of the new NRMLA Code of Ethics since its adoption in its current form by the NRMLA Board of Directors late last year. It is Ethics Advisory Opinion 2008-01 (Ethical Advertising). Introduction. Ethics Advisory Opinion 2008-01 (Ethical Advertising) addresses a very important aspect of the relationship between NRMLA Members and the seniors whose interests they are pledged to serve: the manner in which NRMLA Members market, advertise and make known to seniors the reverse mortgage loans and programs they offer to them. There is a growing concern among seniors and their advocates and legislators, and among NRMLA Members and NRMLA itself, that some NRMLA Members are engaging, participating or tolerating marketing and advertising practices that are false, misleading, deceptive or unfair. In this Ethics Advisory Opinion we refer to such practices, collectively, as “Unethical Advertising.” Unethical Advertising expressly violates the NRMLA Code of Ethics. (A complete copy of the Code of Ethics may be found at www.NRMLAOnline.org.) There is no place in NRMLA for NRMLA Members who engage in Unethical Advertising. The purpose of NRMLA Ethics Advisory Opinion 2008-01 is to provide additional and specific guidance to NRMLA Members about what constitutes Unethical Advertising. Specific examples of such Unethical Advertising are provided below. Discussion. The first Value that the NRMLA Code of Ethics embraces is Fairness. Fairness under the Code of Ethics requires that NRMLA Members “treat consumers with respect and dignity, and in a manner that is fair, reasonable, and as they would want to be treated.” 12
To that end, Rules 102, 103, 104, 105 and 107 of the Code of Ethics (and Rule 301 and 302 related to the Code of Ethics Value of Integrity) expressly bar direct and indirect Unethical Advertising including marketing and advertising that is false, misleading, deceptive or unfair. Rule 102 of the Code of Ethics requires that NRMLA Member compensation be reasonable in amount and be clearly and timely described to consumers. Rule 103 of the Code of Ethics states that NRMLA Members directly or indirectly offering or providing goods or services to consumers (including, for example, insurance or investment products) in conjunction with or that are related to their reverse mortgage lending activities for such consumers, shall do so only in a manner consistent with applicable law and under terms and conditions that are clearly and timely described to consumers. Rule 104 of the Code of Ethics provides that NRMLA Members shall not, directly or indirectly, solicit or communicate with consumers through false, misleading, deceptive, or unfair communications or advertisements, or in any manner inconsistent with applicable law. In such a communication or advertisement, a NRMLA Members shall not refer to a third party (e.g., HUD, FHA, the federal government, AARP) in a manner that misleadingly suggests that such communication is from such third party rather than from such NRMLA Member, and, in the case of NRMLA and AARP, unless each has agreed to be referred to in such advertisement. A communication or advertisement by or on behalf of a NRMLA Member shall clearly identify that member. Rule 105 of the Code of Ethics states that NRMLA Members shall not engage in conduct involving dishonesty, fraud, deceit or misrepresentation, or knowingly make a material false or misleading statement to consumers or others. Rule 107 of the Code of Ethics requires that NRMLA Members describe to consumers the range of programs and products offered by the Member that may provide “a bona fide advantage to such consumers.” Rule 301 of the Code of Ethics requires NRMLA Members accurately to describe both the costs and benefits of the products and services presented to consumers. Rule 302 of the Code of Ethics bars NRLMA Members from requiring, directly or indirectly, that consumers purchase other products or services in order to obtain reverse mortgage loans. Unethical Advertising Rules and Examples. These Code of Ethics Values and Rules, singly and together, support the Committee’s conclusions that the following practices constitute Unethical Advertising that violate the NRMLA Code of Ethics. First, it is a violation of the NRMLA Code of Ethics for a NRMLA Member to market or advertise its particular FHA-insured HECM loan programs as “Government Loan Programs,” or as a “Government Benefit” or as “Government Supported” or as one from or offered by a “Government Loan Division” or as “Official Business” or as “Endorsed” or “Approved” by the Government, by the Federal Government, by HUD, by the FHA, by AARP, or by NRMLA. 13
A HECM loan is a loan made or originated by a lender. The FHA insures a lender’s HECM loan against certain losses, but it is still the lender’s loan and not an FHA or a government loan. Accordingly, a suggestion in such a communication by a NRMLA Member that such a loan is made by the Government or by FHA, rather than by the NRMLA Member, is Unethical Advertising. The FHA provides certain insurance benefits for lenders and borrowers in connection with the lender’s HECM loans; the FHA does not make or originate that HECM loan. Examples of such Unethical Advertising include the following, among other similar marketing and advertising pitches related to a NRMLA Member’s particular FHA-insured HECM loan programs: “Notice: 2007 Government Benefits Increase;” “Notice of 2007 Funding Increase for Seniors;” “or “Information is offered to you as a public service.” A HECM loan is not funded by or a benefit of the Government. An increase by the FHA in the maximum permissible HECM loan limit that it will insure may not result in an increase in the loan amount of any particular HECM loan originated by a NRMLA Member. It is Unethical Advertising by a NRMLA Member to suggest otherwise. Second, it is a violation of the NRMLA Code of Ethics for a NRMLA Member directly or indirectly to state or suggest that a failure to respond to its marketing or advertising will or may result in a loss to the consumer of any consumer benefit to which the consumer is or may be entitled or enjoying. An example of such Unethical Advertising includes the following, among other similar marketing and advertising pitches on behalf of a NRMLA Member: “Before you can benefit from this program, you must call this toll-free number to verify” this or that. Third, it is a violation of the NRMLA Code of Ethics for a NRMLA Member to make misleading or unfair or exaggerated claims of benefits to consumers, particularly if coupled with inadequate (or with no) description of related costs or risks. An example of such Unethical Advertising includes the following, among other similar marketing and advertising pitches by a NRMLA Member: “We [the lender] pay off your mortgage;” or “Works as a living trust.” Fourth, it is a violation of the NRMLA Code of Ethics for a NRMLA Member to provide or arrange for a testimonial or endorsement or infomercial that fails clearly to disclose the nature of the relationship (including, if applicable, that a payment has been made as part of the relationship) between the NRMLA Member and the person or entity providing the testimonial or endorsement or infomercial. This disclosure requirement is effective for any such communication developed after the publication of this Ethics Advisory Opinion. Fifth, it is violation of the NRMLA Code of Ethics for a NRMLA Member to require or suggest that a product or service (such as an annuity or investment product or life or long-term care insurance), other than the reverse mortgage loan, also must be purchased in order to obtain the reverse mortgage loan, or if such product or service (if offered by the NRMLA Member) may not, itself, provide a bona fide advantage to the consumer, or if the NRMLA Member’s compensation in connection with all such products and services is unreasonable in amount or not clearly and timely described to the consumer. 14
An example of such Unethical Advertising includes the cross-selling of a reverse mortgage loan and an annuity by a NRMLA Member if the annuity provides for a deferred benefit unlikely to be of bona fide advantage to the consumer, or if the related commission or other compensation to the NRMLA Member is not clearly disclosed to the consumer and to the counselor. The Ethics Committee is considering a second Ethics Advisory Opinion (2008-02) (Ethical Cross-Selling of Other Products and Services) that it contemplates will provide more comprehensive guidance with respect to the marketing or advertising by a NRMLA Member, or by a NRMLA Member in tandem or concurrently with another, of a reverse mortgage loan and another product or service, including an annuity. Sixth, it is a violation of the NRMLA Code of Ethics for a NRMLA Member to market or advertise to a business partner unreasonably high compensation, even if such compensation clearly and timely is disclosed to the consumer who pays it directly or through reverse mortgage loan proceeds. An example of such Unethical Advertising includes the marketing or advertising by a NRMLA Member of a program to a potential business partner yielding “10 points or more on a reverse mortgage loan” because such a claimed yield from the origination of a reverse mortgage loan, itself, if such loan is originated by a NRMLA Member in a manner that conforms to the requirements of this Code of Ethics, is a false and misleading claim. It is anticipated that Ethics Advisory Opinion 2008-02, referenced above, will provide additional guidance about the marketing and advertising of such programs claiming such yields as a result of the cross-selling of a reverse mortgage loan and other products and services. Indirect Code of Ethics Violations. Under this Ethics Advisory Opinion 2008-01, NRMLA Members may not engage in such Unethical Advertising either directly (such as through their own employees, agents and branch offices) or indirectly (such as through their marketing or business partners, advertising agencies, or lead generation companies). Both direct and indirect Unethical Advertising by a NRMLA Member violates the Code of Ethics. Examples of indirect Unethical Advertising by NRMLA Members that violate the Code of Ethics include Unethical Advertising that benefits a NRMLA Member that is undertaken by a NRMLA Member’s branch office or loan officers or advertising or marketing business partner, or the purchasing of leads from a lead generation company that generates such leads through marketing or advertising that would be Unethical Advertising if performed by the NRMLA Member directly or itself. Conclusion. NRMLA Members routinely and overwhelmingly engage in Ethical Advertising, for the benefit of the seniors they are pledged to serve. All the more reason, then, that there is no place in NRMLA for NRMLA Members who engage in Unethical Advertising. NRMLA Members, seniors, and others are urged to bring to the attention of NRMLA’s President and the Committee concerns they may have about potential Unethical Advertising directly or indirectly by NRMLA Members, for consideration and action by President and Committee in accordance with the procedures described in the Code of Ethics. Contact information for NRMLA may be found at its website at NRMLAOnline.com. 15
ETHICS ADVISORY OPINION 2009-1 Ethical Offers of Other Financial and Insurance Products and Services June 16, 2009 The Ethics and Standards Committee (the "Committee") of the National Reverse Mortgage Lenders Association ("NRMLA"), the trade association of the reverse mortgage lending industry, enforces the NRMLA Code of Ethics and Professional Responsibility (the "Code of Ethics"). All NRMLA Members are required to comply with the Code of Ethics as a condition of their continued membership in NRMLA. If the Committee determines that a NRMLA Member has not complied with the Code of Ethics, sanctions may be imposed, up to and including the termination of NRMLA Membership. Committee decisions enforcing the Code of Ethics may be made public. The Committee also interprets the Code of Ethics, and, from time to time, proposes changes to it for consideration and approval by the NRMLA Board of Directors. This is one of a series of formal Committee interpretations of the NRMLA Code of Ethics. It is Ethics Advisory Opinion 2009-1 (Ethical Offers of Other Financial and Insurance Products and Services). It replaces Ethics Advisory Opinion 2008-2, which was issued by the Committee and NRMLA on April 21, 2008, and which is hereby withdrawn. This Ethics Advisory Opinion reflects, among other things, new guidance in this area provided by the U.S. Department of Housing and Urban Development (HUD) through Mortgagee Letter 2008-24 (September 16, 2008) (the Mortgagee Letter) and related relevant provisions of the recently enacted Housing and Recovery Act of 2008 (HERA), and related enactments in California (California Civil Code 1923.2(i)) and Rhode Island (Code, Section 34-25.1-7), among others. NRMLA Ethics Advisory Opinions, and the NRMLA Code of Ethics, are published on the NRMLA website, www.NRMLAOnline.org. Introduction. This Ethics Advisory Opinion 2009-1 (Ethical Offers of Other Financial and Insurance Products and Services) addresses a very important aspect of the relationship between NRMLA Members and the seniors whose financial security interests they are pledged to serve: the manner and extent to which NRMLA Members, consistent with the applicable requirements of the Code of Ethics , may refer, recommend, originate for or offer or crosssell to, their senior reverse mortgage consumers (collectively, "product offering activities"), financial or insurance products (inc luding but not limited to annuities and as further defined below) other than reverse mortgage loans. 16
Changes made by HERA, the guidance provided through the Mortgagee Letter, enactments of the states , and concerns expressed by and among NRMLA Members and NRMLA itself, have prompted the Committee to issue this Ethics Advisory Opinion, to help assure that NRMLA Members engaging or participating in the product offering activities to seniors of financial or insurance products do so in a manner consistent with the applicable requirements of the Code of Ethics, and do not do so in a manner inconsistent with the Code of Ethics . In this Ethics Advisory Opinion, we refer to practices by NRMLA Members that are consistent with the Code of Ethics as "Ethcial Product Offering" and practices thatare not as “Unethical Product Offering.” Ethical Product Offering is permissible for NRMLA Members under the Code of Ethics . Unehtical Product Offering violates the NRMLA Code of Ethics. There is no place in NRMLAofr NRMLA Members who engage in Unethical Product Offering. The purpose of NRMLA Ethics Advisory Opinion 2009-1 is to provide additional and specific guidance to NRMLA Members about what constitutes Ethical Product Offering and Unethical Product Offering. The Broader Context. Initially conceived as an effective way for seniors to tap into or liquefy the equity in their homes in order to help meet their financial security needs as their working income diminishes , reverse mortgages have evolved into a significant retirement planning and security tool. Reverse Mortgages can help seniors age in place, and they can help finance longevity. Another evolving trend is for seniors to want to be albe to rely upon a single trusted source for holistic advice in these very imporatnt areas of their lives. It is in th is context that the need alsoarises to help assure that seniors are provided with all of the information they n eed to make well-informed decisions about such advisors, and that safeguards be put into place to help prevent abuses of the trust of seniors, s uch safeguards are particularly appropriate whersuch trus ted advisors offer both reverse mortgages and other financial products and services to seniors. This Ethics Advisory Opinion provides an ethical framework for NRMLA Members, as trusted advisors, to establish these safeguards wh ile helping seniors consider, when and wh ere appropriate, financial and insurance products in additio n to reverse mortgages. While this Ethics Advisory Opinion, by its terms, applies onyl to NRMLA Members , as noted below (see“Indirect Code of Ethics Vioaltions”) it also affects others. Moreover, it is hoped that th e Ethical Product Offering requirements for NRMLA Members described in this Ethics Advisory Opinion become the market place 17
standard by which HUD, other regulators, and seniors judge and evaluate the conduct of all who offer such products to seniors as their trusted advisors. The Code of Ethics . The first Value that the NRMLA Cod e ofEthics embraces is Fairness. Fairness under the Code of Ethics requirsethat NRMLA Members treat seniors with “respect and dignity, and in a manner that is fiar, reasonable, and as theywould want to be treated.” Additio nal Values embraced under the Code of Ethics require Integrity, Competence, Diligence, and Professionalism. Rule 102 of the Code of Ethics requires that NRMLA Member revers e mortgage compensation be reasonable in amount and be clearly and timely described to seniors. Rule 103 of the Code of Ethics states that NRMLA Members directly or indirectly offering or providing goods or services to seniors (including, for example, insurance or investment products) in conjunction with or that are related to their reverse mortgage lending a ctivities for such seniors, shall do so only in a manner consistent withpplaicable law and under terms and conditions that are clearly and timely descr ibed to seniors. Rule 107 of the Code of Ethics requires that NRMLA Members desibcre to seniors the range of programs and products offered by the Member that may provide “a bona fide advantage” to such seniors. Rule 301 of the Code o f Ethics requires NRMLA Members accurately to descr ibe both the cos ts and benefits of the products and services preseendt to seniors. Rule 302 of the Code of Ethics bars NRLMA Members from requiring, directly or indirectly, that seniors purchase other products or services in order to obtain reverse mortgage loans. Rule 303 of the Code of Ethics generally erquires NRMLA Memb ers to arrange for the disbursement of reverse mortgage proceeds directly to seniors . Rule 402 of the Code of Ethics generally erquires NRMLA Memb ers to advise seniors to seek appropriate professional counsel and advice prior to making decisions involving reverse mortgages, and bars NRMLA Members not qualified and appropriately licensed to provide such counsel and advice to seniors from providing such advice and counsel. Rule 501 of the Code of Ethics requires NRMLA Members to exercise reasonable efforts to secure sufficient information to determine the senior's needs and objectives . Rule 605 of the Code of Ethics generally erquires NRMLA Members to comply with all applicable regulatory requirements. HUD’s Guidance. In Mortgagee Letter 2008-24 (S eptember 16, 2008) (Home Equity Conversion Mortgage (HECM) Program – Requirements on Mortgage 18
Originators) (the Mortgagee Letter), HUD referred to the applicable provisions of HERA, that added to the National Housing Act new Sections 255(n)(1) and (n)(2). In essence, these HERA provisions provide for additional protections for seniors participating in the HECM reverse mortgage loan program, by barring certain arrangements that may provide incentives for the sale to such seniors of other financial or insurance products that do not meet their needs (the HERA Goals). They do so, in general, by requiring that there be appropriate firewalls or other safeguards to inhibit such inappropriate incentives, and also by prohibiting such a senior, as a condition of obtaining a HECM loan, from being required also to purchase such a financial or insurance product. In the Mortgagee Letter, HUD noted its intention to provide definitive guidance with respect to HERA Section 255(n), following the receipt of comments from interested parties. NRMLA and others have provided such initial comments to HUD, and the Committee intends to amend this Ethics Advisory Opinion as and when and to the extent that such definitive guidance, subsequently issued by HUD, affects it. In the interim, and until such HUD definitive guidance is issued, the Mortgagee Letter “advises that mortgagees must not condition a HECM mortgage on the purchase of any other financial or insurance product, and should strive to establish, consistent with the new law, firewalls and other safeguards to ensure that there is no undue pressure or appearance of pressure for a mortgagor to purchase another product of the mortgage originator or mortgage originator’s company.” In this Ethics Advisory Opinion, we refer to this HUD advice as “HUD’s Interim Guidance.” Ethical and Unethical Product Offering Examples and Safeguards. These Code of Ethics Values and Rules, singly and together, HUD’s Interim Guidance, and a consideration of the HERA Goals, support the Committee's conclusions that the following practices constitute, respectively, Ethical Product Offering and Unethical Product Offering under the NRMLA Code of Ethics. First, a NRMLA Member engages in Ethical Product Offering if it has is in place at least one of the following Product Offering Safeguards, and other applicable requirements of this Ethics Advisory Opinion also are met. (1) The Separate Originator Safeguard. The NRMLA Member shall separate those engaged in the offering, marketing and origination of reverse mortgages from those engaged in the offering, marketing and origination of other financial and insurance products, and take reasonable steps to assure that no one engaged in either of such activities receives, directly or indirectly, incentives or compensation for being engaged in the other. In this Ethics Advisory Opinion, this Safeguard is referred to as the Separate Originator Safeguard. Under the Separate Originator Safeguard, the NRMLA Member may offer both reverse mortgages and financial and insurance products concurrently, as long as those engaged in the offering, marketing and origination of all such products also are appropriately licensed to do so and comply with all
applicable legal requirements, including the HUD Interim Guidance, and, as noted above, are separate by compensation. (2) The Separate Transaction Safeguard. The NRMLA Member shall separate the offering, marketing and origination of reverse mortgages from the offering, marketing and origination of other financial and insurance products by taking reasonable steps to assure that they are distinct and separate transactions. In this Ethics Advisory Opinion, this Safeguard is referred to as the Separate Transaction Safeguard. Under the Separate Transaction Safeguard, a distinct and separate transaction may be originated by the same appropriately licensed individual complying with the HUD Interim Guidance (in contrast, accordingly, with the Separate Originator Safeguard approach described above in which, among other things, different individuals are required to originate the transactions for the different products), as long as at least seven (7) business days (or, if required by separate legislation, any longer period during which the senior may rescind the reverse mortgage loan) have expired before the senior is offered any other financial or insurance product, and disbursement of the proceeds of a reverse mortgage loan is not made di rectly to the provider of another financial insurance product or service or at or in connection with the closing of the reverse mortgage. The Committee does not intend, through its description of the Separate Originator Safeguard and the Separate Transaction Safeguard as examples of Ethical Product Offering, to limit NRMLA Members only to these approaches in providing such Safeguards. Other approaches that achieve the HERA Goals and adhere to the HUD Interim Guidance, and that are consistent with the requirements of the Code of Conduct and this Ethics Advisory Opinion, may be utilized by NRMLA Members as Product Offering Safeguards as they engage in Ethical Product Offering. Second, in addition to the Product Offering Safeguards, a NRMLA Member engaged in Ethical Product Offering also shall provide to the senior, prior to offering such other financial or insurance products, a disclosure that is signed by both the senior and by the person making such offer, that makes clear that the senior has no obligation to purchase any such financial or insurance product with the proceeds of such reverse mortgage, and that reasonably describes to the senior the bona fide advantages to the seniors of purchasing such financial or insurance product with the proceeds of such reverse mortgage if the senior chooses to do so. In this Ethics Advisory Opinion, this disclosure is referred to as the Anti-Tying and Bona Fide Advantage Disclosure Safeguard. Third, notwithstanding its Product Offering Safeguards, it is a violationof the NRMLA Code of Ethics, and thus Unethical Product Offering, for a NRMLA Member to engage in any product offering activities involving deferred fixed rate annuities with surrender charges, deferred variable rate annuities with surrender charges, deferred equity indexed annuity with surrender charges and any financial product that applies a penalty for early withdrawal or cancellation if it does not provide a bona fide advantage to such senior when it is 19
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